Macroeconomic Analysis of Malaysia’s Economic

Running head: MACROECONOMICS
Macroeconomic Analysis of Malaysia’s Economic and Financial Market Performance
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MACROECONOMICS
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Introduction
Malaysia is the third biggest economy of the Southeast Asia, preceded by Indonesia and
Thailand and it is also the 35th biggest economy of the world. The economy has diversified from
agricultural economy to the one focused on service and manufacturing and the growth was
attained from high level of exports of electronic parts and components and electrical appliances.
Malaysian economy is one of the most open economies of the world1. In the past five years, the
country has experienced GDP growth, although the GDP growth rate has been fluctuating.
According to Nambiar (2020), the economy experienced GDP growth since 2015, however, in
2019, the Malaysian economy has experienced state of suspension and the growth rate was down
from that of 2018. The stock market performance was also poor in 2019 as compared to 2018
due to uncertainties in the global trade uncertainties, such as, US-China trade war2. This report
will provide an overview of the economic and financial market performance of Malaysia since
2015 to 2019 by analyzing the macroeconomic factors that influence the economy and will
predict the 2020 performance.
Analysis of macroeconomic factors
According to World Bank (2020), it has been observed that between 2015 and 2019, the
GDP of Malaysia in current USD has increased from $301.35 billion to $365.30 billion (Figure
1). However, the growth rate is not significantly high, rather it was much slower and fluctuating
(Figure 2).
1 Wong, Kum Yeen, Joon Huang Chuah, and Chris Hope. "As an emerging economy, should Malaysia adopt carbon
taxation?." Energy & Environment 30, no. 1 (2019): 91-108.
2 Nambiar, S. 2020. "What’S Next For Malaysia’S Meandering Economy In 2020?". Thediplomat.Com.
https://thediplomat.com/2020/01/whats-next-for-malaysias-meandering-economy-in-2020/.

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2015 2016 2017 2018 2019
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
400.00
301.35 301.26 318.96
358.58 365.30
Malaysia GDP (current US$, in billion),
2015-2019
Figure 1: Malaysia GDP (current US$, in billion), 2015-2019
(Source: World Bank 2020)
The annual GDP growth rate fell slightly in 2016 and increased sharply in 2017. However, the
growth rate declined in 2018 and further in 2019.
2015 2016 2017 2018 2019
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
5.09
4.45
5.74
4.74 4.40
Malaysia GDP Growth (Annual %),
2015-2019
Figure 2: Malaysia GDP Growth (Annual %), 2015-2019
(Source: Tradingeconomics.com (a) 2020)
The rate of unemployment over the period of 2015 to 2019 reflects the changes in the
growth rate of GDP in Malaysia. In the years that have higher GDP growth rate, the

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unemployment rate was mostly lower, and it is higher when the GDP growth rate was lower
(Figure 3). For instance, 2019 experienced a stagnating and lower GDP growth and the
unemployment rate was higher compared to 20183.
2015 2016 2017 2018 2019
2.9
3
3.1
3.2
3.3
3.4
3.5
3.1
3.4 3.4
3.3
3.4
Malaysia Unemployment, total (% of total
labor force) (national estimate), 2015-
2019
Figure 3: Malaysia Unemployment, total (% of total labor force), 2015-2019
(Source: World Bank 2020)
Inflation rate showed a very fluctuating trend over the period of 2015 to 2019. It reached
highest in 2017 at 3.87% while it dropped sharply in 2018 to 0.88% and increased slightly to
1.02% in 2019 (Figure 4). This indicates a recovery for the economy as rise in inflation implies
growing demand in the economy. Extreme fall in the price level indicates slower economic
growth, lack of demand and shortage of disposable income and lower production level and
hence, it is not desired in the economies4.
3 Tradingeconomics.com (a). 2020. "Malaysia GDP Annual Growth Rate | 2000-2019 Data | 2020-2022 Forecast |
Calendar". Tradingeconomics.Com. https://tradingeconomics.com/malaysia/gdp-growth-annual.
4 Goodwin, Neva, Jonathan M. Harris, Julie A. Nelson, Brian Roach, and Mariano Torras. Macroeconomics in
context. Routledge, 2015.